Okay, first, sorry that this has not become a monthly update yet. Good news is we have been so busy helping people I don't have much time to write. However, here we are with some commentary for the current best rates we can find. Also, have a few ideas on how to maximize your rates.
Outside of CD rates continuing to fall, not much has changed in the real world. The longer the Fed keeps rates low, the lower CD rates will fall. Once the Fed begins to signal higher rates, CD rates will rise. Its anybody's guess as to when that will be. Another pressure on the CD rates is the national rate cap that the FDIC has imposed.
The fed has continued to successfully sell our debt around the world. This has helped keep treasury yields and thus government backed bond yields low. Today the 2-year stands at 0.95%, the 5-year at 2.39%, and the 10-year 3.69%. This is quite a cliff we are over. higher rates now would short circuit a very weak housing sector and probably give us a double-dip recession. Low rates however give too much freedom for hedging and thus creating big bubbles that can burst.
Fed Funds are still between 0% and 0.25% For 1-year CD rates we saw an average decrease of about 0.35%. On 5-year CDs, the decrease has been around 0.25%. The economy is still very shaky. The recovery (if you can call it that) is likely to last years. The government is trying to stall foreclosures, but with unemployment near 10%, a lot of people just can't afford a payment no matter what kind of modification they get. I recently read a statistic that 70% of those that have received a modification are back in the red again. Commercial real estate and sovereign debt problems (Greece, Dubai) are the ones that are seen to be next crises.
Soon after the larger banks began paying back TARP funds they returned to paying huge bonuses. I'm all for paying paid well when you do well, but these bonuses aren't based on long-term value for the company or investor. That is where a serious disconnect is.
Okay, so for some rates. Alliant Credit Union continues to have "high" 1-year rates at 2.10% APY. Their closest bank competitor is a 1.75%. Pentagon has a 3Y at 3.00% and a 5Y at 3.50%. Their penalty for early withdrawal is 6-months of interest. This makes for an attractive play if you think rates will be considerably higher in 2-years. Bump up CDs can also be good. These are usually 2 - 5yr CDs with options to move the rates up as the bank moves the rates up.
For more Bank Certificates of Deposit come on by.
Chris Duncan is a FINRA Registered Representative. He specializes in helping clients find the best and highest CD rates nationwide. His clients include individuals, financial institutions, corporations, and public agencies. Visit us at http://www.jumbocdinvestments.com
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